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Money manager hits
awkward snag in Dell buyout case
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(Photo: Paul
Sakuma, AP) |
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Despite
publicly opposing Michael Dell's bid to take the computer company he
founded private, mutual fund giant T. Rowe Price supported the
transaction in the voting booth, according to an analysis of the
mutual fund giant's voting records by USA TODAY.
T. Rowe's
regulatory filings show that the money manager, which is opposing the
Dell deal in Delaware court, voted "for" the 2013 buyout across its
funds, including the Equity Income Fund, which owned 16.5 million Dell
shares, the Science & Technology Fund, which owned seven million
shares, the Balanced Fund and the Equity Index 500 Fund.
T. Rowe
Price's support for the $25 billion transaction contradicts statements
it made leading up to the controversial deal, and afterward in
Delaware court, where it has been seeking more than the $13.75 a share
paid to stock owners, in cash.
"We are
aware of a discrepancy in the communication of our voting instruction
on the Dell buyout," the mutual fund company said in a statement. "T.
Rowe Price has always opposed the Dell buyout and has made that
opposition well known. We view the discrepancy as irrelevant for
purposes of our ability to pursue appraisal," T. Rowe said, referring
to its efforts to obtain more through legal channels. "Our goal
remains to secure fair value from this deal for our clients."
Dell
officials declined to say when the company discovered the discrepancy,
but mutual funds are required to release their voting records in bulk
once a year.
Experts
say the "for" vote could upend T. Rowe's case for more money.
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“You give up your right
to complain when you vote 'For' the transaction”
Lawrence Rolnick |
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Under
Delaware law, shareholders may ask a judge to place a value on
corporate transactions they deem unfair. But to do this, they cannot
also vote "for" the transaction, said Lawrence Rolnick, a securities
lawyer with Lowenstein Sandler. "You give up your right to complain
when you vote 'for' the transaction," Rolnick said.
John
Latham, Dell's lawyer in the Delaware Chancery Court case, declined to
comment. The next hearing is scheduled for May 11.
Dell's
initial offer to pay $13.65 a share was met with objections from a
who's who of Wall Street heavyweights, including billionaire Carl
Icahn, Pzena Investment Management and Southeastern Asset Management
Inc., which was Dell's largest outside shareholder with an 8.4% stake.
T. Rowe
Price joined the chorus as Dell's third largest shareholder with a
4.4% stake. "We do not intend to support the offer as put forward," T.
Rowe chairman and chief investment officer, Brian Rogers, said in
February 2013.
After a
sweetened deal was approved, T. Rowe joined a group of investors
holding 47.5 million shares who demanded a judge take a second look.
T. Rowe was the largest shareholder to reserve its rights to a court
appraisal, with more than 30 million Dell shares.
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“Our goal remains to
secure fair value from this deal for our clients.”
T. Rowe Price |
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T. Rowe
Price's lawyer, Stuart Grant, cited case law allowing shareholders
seeking court appraisal to rely on the votes of the entity that
processed the stock on behalf of shareholders, or Cede & Co., a unit
of Depository Trust Company.
"I think
the case law is rock solid and the only thing that counts is how the
record holder votes its shared," Grant said in an interview. "To me it
is cut-and-dried that all of the stock holders who sought appraisal
will be entitled to appraisal."
But some
experts say this option is not available for shareholders who voted
"for" a transaction, even if they did so by mistake.
"That case
was about what do you do if there's no evidence for how they voted.
That's different," said Lawrence Hamermesh, professor of corporate and
business law at Widener University.
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2015 USATODAY, a division of Gannett Satellite Information Network,
Inc. |
